Analysts Cut Alcoa Price Target After Third Quarter Disappoints

Lower aluminum prices, higher energy costs and a weak U.S. dollar
contributed to disappointing third quarter results from Alcoa Inc. (NYSE:AA),
but the company did announce that its board approved a share buyback of
as much as 25% of outstanding shares. The previous amount was 10%.

Alcoa shares have fallen off nearly 20% since the middle of July, when takeover speculation surrounded it and rival Alcan Inc. (NYSE:AL). But Alcan got a buyer in Rio Tinto (RTP) (Alcoa lost that battle) and Alcoa remains alone.

Alcoa
shares rallied more than 3.5% ahead of the results, which were reported
after markets closed on Tuesday. But the market may be disappointed by
what Alcoa had to say.

UBS analyst Brian MacArthur was. He
lowered his price target by US$3 to US$47, but maintained a “buy”
rating on the shares, partly because of the positive long-term view for
aluminum prices at UBS.

“Given the shares’ inclusion in the DJIA
and large liquidity, we believe Alcoa should trade at a premium to its
mining peers,” Mr. MacArthur said in a research note.

“We
still think there are more interesting opportunities across the
industry as we remain concerned with Alcoa’s integration and free cash
clow story and growing supply of aluminum globally,” the firm said in a
note.